Today's regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii) systemically important institutions cannot collapse suddenly;...

We define and construct 'integration' for a large sample of 2287 US banks-measured by their level of exposure to common factors-during the period 1993-2019. Integration among US banks shows a steady increase and displays significantly high peaks during episodes of market distress such as the...

We define and measure integration among a sample of 357 US banks over 25 years from 1993 to 2017 and show that the median US bank's integration has increased significantly post-2005. During the great recession and the Eurozone crisis, integration levels among US banks display a significant rise...

Conventional wisdom suggests that increases in public information improve market liquidity. However, if greater public information incentivizes only sophisticated investors to produce private information, it could exacerbate information asymmetry among investors and thus reduce liquidity. We...

This paper provides practical insights into common statistical measures used to validate a model's discriminatory power for the probability of default (PD), loss liven default (LGD) and exposure at default (EAD). The study has more of an informative value without delivering empirical evidence....

VaR_Delta-Normal fails in two counts: subadditivity and potentially producing losses larger than its portfolio value. This paper solves the second inconsistency developing formulas derived from a put option, named PVaR_Delta-Normal and Put_Expected_Shortfall, PSF_Delta-Normal; the latter also...

We identify and track over time the factors that make the financial system vulnerable to fire sales by constructing an index of aggregate vulnerability. The index starts increasing quickly in 2004, before most other major systemic risk measures, and triples by 2008. The fire-sale-specific...

This paper investigates the sources of macrofinancial fluctuations and turbulence within the framework of an approximate linear dynamic stochastic general equilibrium model of the world economy, augmented with structural shocks exhibiting potentially asymmetric generalized autoregressive...

This paper investigates a model of endogenous product differentiation in subprime lending markets. In the subprime literature the discussion surrounds two competing hypotheses about pricing behavior. The opportunity pricing hypothesis suggests that lenders are rent seeking in their pricing...

We develop a new methodology to extract market expectations of recovery rates that uses information from credit default swap spreads on debt instruments of different seniorities, incorporates information on the firm-specific liability structure and allows for deviations from the absolute...